March 6 (Bloomberg) -- Indonesia, the world’s third-largest
exporter of liquefied natural gas, will start importing the fuel
by 2018 to meet increasing domestic demand, according to the
nation’s energy regulator.

Indonesia’s existing LNG-receiving terminal and three
planned facilities will get a total of 821 cargoes from domestic
gas fields from 2013 to 2025, Rudi Rubiandini, the head of SKK
Migas, said in an interview yesterday. That won’t be enough to
meet demand, and the plants will have to buy additional supplies
from overseas, he said. The nation will continue to export the
fuel under long-term supply contracts, he said.

“We can’t keep all supply for domestic use,” Rubiandini
said. “We still need some to meet demand from overseas buyers
such as Japan that have invested in our energy projects.”

Southeast Asian nations including Indonesia will account
for a third of LNG demand growth in Asia by 2025, with the
region consuming an additional 45 million metric tons a year,
Wood Mackenzie Ltd. said in a report on Feb. 20. LNG is fuel
cooled to minus 160 degrees Celsius (minus 256 Fahrenheit),
reducing its volume and converting it to a liquid. Qatar and
Malaysia were the world’s biggest exporters of the fuel in 2011,
according to BP Plc’s Statistical Review of World Energy.

Falling Prices

Indonesia is increasing its reliance on gas as crude output
declines. It may supply 52 percent of its production of the
cleaner-burning fuel to domestic buyers by 2016, up from 47
percent now, Rubiandini said. The country, which left the
Organization of Petroleum Exporting Countries in 2008, won’t
return to being a net oil exporter, he said.

The nation plans to produce 7.89 trillion British thermal
units a day of gas this year, up about 8 percent from 7.3
trillion in 2012, according to the regulator’s data.

“Importing LNG won’t be a problem for domestic users
because prices may fall in the next four years,” Rubiandini
said. Prices may drop to $10 to $11 per million Btu from $16 to
$17 per million Btu today, he said.

Global liquefied natural gas prices on the spot market will
enter a bearish cycle from 2016 to 2017 as new supply comes
online, according to a Goldman Sachs Group Inc. report on Feb
19. Liquefaction capacity will increase to 660 billion cubic
meters a year in 10 years from current capacity of 400 billion,
Samantha Dart, a London-based analyst for the firm, said in the
note.

Time to Sell

“It is time to sell LNG for long-term contracts while
prices are still good,” Rubiandini said. “We won’t hold
exports from future gas projects,” he said.

LNG cargoes to Asia may average $13 per million Btu over
the next five to 20 years, while global spot, or short-term
shipments, will be $12 per million Btu, Guy Broggi, Total SA’s
senior LNG adviser, told a conference in Singapore today.

The nation has 17 oil and gas projects that are scheduled
to be producing by 2018, including Masela block at Arafura sea
according to data provided by the regulator in December 2012.
Masela block is expected to start production in 2018 and will
feed the gas to a floating plant with output capacity of 2.5
million tons.